What’s the significance of macro market analysis?

Hello, this is Irino, a strategy consultant.

The positioning of macro market analysis

Executive summary
Background
Management team
Company overview
Management and business principles
Product/service overview
How your profits are made
Analysis of the market and the competitors ♦♦♦
Marketing and sales strategies
Operation plans
Personnel strategies
Start-up strategies
Growth strategies
Exit strategies
Financial plans :
– Sales forecast
– Cost plans
– Financing forecast
– Capital policies
Risk management
Project management

The powerpoint sample I have prepared for this particular section of business plan documents is taken from “analysing the market as well as your competitors”.

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So what?

This page deals with the topic of market size and market growth rate in order to analyse a market for a certain product from a macroscopic point of view. I have checked public statistical data and I am using sales amount of year 2006 for market size and CAGR for 5 years as a barometer for market growth rate. What I want you to pay a special attention to here is the “So what” part.

“Area A and B both have a huge market size and the growth rate of the market is really high”
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So what?
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“Our company should target area A and area B”

Do you come to a conclusion like this? The answer would be “yes” for major corporations. However, this logic is not valid for venture companies or intrapreneurs.

Areas C and D have enough market sizes for venture companies to survive.
Areas C and D are too small for major corporations to compete.
The reason for minus growth in areas C and D is due to dissatisfaction of existing companies and venture companies can respond to this better.

If these conditions are met, then areas C and D would be attractive targets for venture companies. What I want to stress here is there are cases when no matter how much time you spend on macroscopic analysis of a market, it is difficult for venture companies to reach concrete conclusions. What I want you to watch out in “Market and competitors analysis (Industry analysis)” section is not to jump to microscopic conclusions easily by using macroscopic data. I often come across business plan documents that define targeting with such a logical leap even for macroscopic market analysis. This tends to be true for managers who have worked for major corporations. When considering medium and long term growth plan, it does help to grasp the market size from a macroscopic point of view, but when you are trying to figure out a target during start-up phase, the information shall be used only as a reference and not as a determining factor.

Let me use extreme logic without the fear of being misunderstood, I would say macroscopic market analysis during start-up phase for venture companies is not really necessary.

That’s it for today.

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